Ali’s blog

Mostly quant stuff with occasional digressions

Recession looking more likely…

Posted by alifinmath on January 3, 2008

A piece in yesterday’s FT:

Crude oil prices briefly hit the $100-a-barrel mark and gold prices jumped to an all-time high as investors poured money into commodities on Wednesday amid deepening fears about the weakness of the US dollar.

The dollar fell against the euro and the yen after a report that showed the US manufacturing sector slumping to its lowest levels in five years during December. Investors bet that the Federal Reserve would be forced to lower interest rates in response to economic weakness, potentially increasing the downward pressure on the dollar.

The Institute for Supply Management said that its manufacturing index for December fell to 47.7, its lowest level since April 2003 and well below 50.8 in November. A reading below 50 indicates a contraction in activity and has historically served as a harbinger of recession.

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